What’s it all about?
Captives are a type insurance company that protects its owner’s risks. It covers any claims made against the owner’s company. It can be difficult to choose a captive manager. There used to only be a handful of major American captive management companies. However, there have been many new, start-up captive managers who are now competing for customers.
There are a few things you need to look out for to feel confident about who you choose.
Experience for Managers and Staff
Accounting, tax, and insurance skills are essential for successful captive management. These skills should be available to the captive manager and staff. You should ensure that at least one person in your staff has the appropriate training, as demonstrated by CPA licenses or insurance backgrounds. Pay attention to the individual credentials of each manager.
- How long has he been in charge?
- What is the longest time he has worked in this field.
- What number of clients does he have at the moment?
It’s vital to stay current with technology and industry developments in order to meet client needs. A good captive manager will spend time understanding your business and suggest policies through your captive to address the real risks. A policy to protect against cyber liability, for example, would be appropriate for large medical billing offices that track financial and medical records of individuals, but not for small transport companies.
A captive insurance company can be a tax-efficient way to save money for the future. It can also provide powerful income and estate tax benefits for its owner. It is important to be familiar with the tax knowledge and approach of your captive manager with respect to IRS rules. Some captive managers are more aggressive and use Federal court cases to structure their captives. Others follow the stricter IRS “safe harbor” standards for their captives.
The client should be able to understand the pros and cons of each approach from the captive manager.
It is important to find out if your captive manager provides all of the services you require. The following services should be offered by your manager: tax preparation, regulatory, and underwriting. These services may be outsourced, and you might have problems down the line.
A captive manager is essentially the purchase of services. You should ensure that the captive manager is accessible and responsive. There should be multiple ways to contact the manager. It is important to feel comfortable around the managers. You should ensure that they listen to you and are responsive.
A captive manager who is independent employed is always a good idea. This means that the manager doesn’t have to make everyone happy except you. Managers may require that captive funds be invested through their investment platform. This fee is paid by the captive manager. This can result in poorer service or a loss of independence.
Fair fees should reflect the cost of the services rendered. Compare the prices of different companies and be wary of those who increase your annual costs by 5%. Many companies charge a flat fee to manage, but then add fees for underwriting, tax return preparation, policy issuance, local agents, license fees, and so on. Some companies offer bundled captive management with one flat fee. Prices that sound too good to be true should be avoided. It is possible that the company is trying to attract new business by offering high prices without disclosing all fees.
Finally, look into the past performance of the manager. A manager will have a track record. It is a great way to see how the manager has performed for clients.